Capital & Regional Regulatory News (CAL)

11 Mar 2008 07:02

Capital & Regional plc11 March 2008 11 March 2008 CAPITAL & REGIONAL PLC: PRELIMINARY RESULTS 2007 Capital & Regional plc, the co-investing property asset manager, today announcesits unaudited preliminary results for the year ended 30 December 2007. Financial Highlights* 2005 2006 2007 Property under management £5.1bn £6.5bn £6.1bnNet assets £708m £913m £703mTriple net diluted NAV per share £9.85 £12.72 £10.04 Return on equity 41% 32% (18%)Recurring pre-tax profit £23.1m £32.3m £32.7mDividend per share 18p 26p 27p Recurring pre tax profit per share 33p 46p 46pBasic Earnings per share (note 6) 394p 317p (236p) Profit/(loss) before tax £199m £251m (£167m) * for definition of terms, refer to "Glossary of Terms" on page 30** before adjusting for performance fee clawback (50p per share after adjusting for PF clawback) Highlights • Total return for twelve months: (18%)• Triple net diluted asset value per share: £10.04 per share• Recurring pre-tax profit up 1% to: £32.7m• Final dividend: 17p per share Commenting on the results, Martin Barber, Chief Executive said: "Turmoil in financial markets led to a rapid fall in property values in the lastquarter of 2007. Our UK portfolio was not immune and it fell in value by 10% inline with other retail property. However, our tenant markets have held up well,and our diversification into Germany is showing rewards. There is every chancethat if credit conditions ease the property market will stabilise in mid 2008,and values may even be starting to rise slightly by the end of the year." - ENDS - For further information: Capital & Regional:Martin Barber, Chief Executive Tel: 020 7932 8000William Sunnucks, Finance Director Tel: 0207 932 8000 MaitlandMartin Leeburn or Emma Burdett Tel: 020 7379 5151 Chairman's statementTom Chandos Capital & Regional has seen a marked fall in the valuation of many of itsproperty interests in 2007, a year in which there have been exceptional stressesin the world's financial markets. Although net rental income and management fees were resilient, contributing torecurring pre-tax profits of £32.7m (2006: £32.3m), the weakness of UK property valuations, the impact of gearing in a falling market and theclaw-back of performance fees led to a reduction in triple net NAV per share to£10.04 per share (December 2006: £12.72 per share). The pre-tax loss for theyear, which under IFRS rules includes the unrealised valuation deficit, was£167m (2006: £251m profit). A final dividend of 17p per share is being recommended, the same level as lastyear. When combined with the increased interim dividend of 10p per share alreadypaid, shareholders will enjoy 4% higher dividend income than in respect of 2006. 2008 promises a continuation of the challenging conditions seen in 2007, with amarket consensus of further downward movements in UK valuations during thecourse of the year. The Company is prepared for these conditions and the releaseof capital arising from the formation of a trade parks fund since the year end has further strengthened our position. Turbulence in the financial markets is outside the Company's control, whereasthe active management of the £6 billion of properties for which we areresponsible is our constant focus. We have continued to work on our tenant mix,grow footfall and concentrate on what the visitors to our centres and parkswant. The attractiveness of our properties to our tenants is consequentlystrengthened; and, in turn, looking through the volatility of currentconditions, their ultimate value should be enhanced. This can only be achieved through the efforts of all of our employees and, insuch a testing year, their performance has been exemplary and deserves ourthanks. They will be led from April 1 2008 by a new chief executive, Hugh Scott-Barrett, who was from 2000 to 2007 a member of the managing board of ABN AMRO, most recently as chief financial officer. He succeeds the Company's founder Martin Barber, whose success in building the Company over the past thirty years provides the base from which future growth can be built. Operating reviewMartin Barber, Chief ExecutiveXavier Pullen, Deputy Chief Executive Occupier markets Our occupier markets have been generally stable, and as yet we haven't seen anytangible signs of the long anticipated downturn. Market conditions in our fiveportfolios are described below: Our shopping centres enjoyed "business as usual" during 2007. Estimated RentalValues (ERVs) grew by 5.5% (1.9% excluding major developments) and net rentalincome increased by 6.3%, (2.8% on a like for like basis). The annualised rentalincome lost through bankruptcies in January and February 2008 was 1.3% of thetotal, compared to 2.1% in Q1 2007. Our average occupancy level throughout 2007,including space under development, was 94.9%, down from a 95.3% average in 2006.This reflects increased development activities principally at our Malls inBlackburn and Wood Green. Net space available to let at the year end represented2% of ERV compared with 2.1% in 2006. Our retail parks held throughout the year saw an increase in net rental income of 5.0% and a fall in retail warehouse vacancies from 5.3% to 4.5%. However, rental growth prospects for bulky goods retail parks were adversely affected inearly 2007 as a result of "big-box DIY" market rent reviews and declining demand for space from other bulky goods operators. The Junction portfolio has 6 B&Q's whose estimated rental values (ERVs) on a like for like basis fell by7.6%. ERVs in the remainder of the portfolio remained stable with a nominal fall of 0.9%. Our leisure portfolio has seen the best cinema trading for the last decade.Overall Leisure has been very resilient as an asset class and is confirming ourprevious experience that consumer spending continues in leisure throughout theeconomic cycle, but with a shift to quality and good value for money offers intougher times. We believe that our properties are well positioned for this market. 2007 saw rental growth of 2.0% and occupancy stable at 96.7%. Our "Fix" trade centres portfolio has shown rental growth of 3.3% for the yearon a like-for-like basis. Vacancies which were not backed by rental guarantees fell from 7.6% to 5.2%. There is strong tenant demand for theseproperties which offer occupiers the potential for substantial profit onmoderate rents. Our German portfolio is producing a strong and stable cash flow, contributing£9.6m to our recurring pre-tax profit from 22% of the portfolio. The Germaneconomy is performing well, and fears that the 3% increase in VAT in January2007 would dampen the recovery of consumer spending appear to have beenmisplaced. Property investment market After a five year run in which our properties substantially increased in value,we saw a sharp correction in 2007, driven by a drop in confidence and tighteningof credit conditions in the wider financial markets. Transactions werescarce, but valuers rapidly raised the yields in their valuations in line withmarket sentiment. Our portfolios have been affected by yield shift as follows: Portfolio Equivalent Equivalent Equivalent C&R yield yield Dec yield Dec yield Dec 2007 in 2005 2006 2007 2007 Mall 5.73% 5.21% 5.69% 0.48% Junction 4.86% 4.45% 5.32% 0.87% X-Leisure 6.32% 5.69% 5.78% 0.09% Fix 5.72% 6.26% 0.54%UK Weighted average 5.14% 5.69% 0.55% Germany* 6.60% 6.01% 5.99% (0.02%) * Initial rather than equivalent yield Overall our UK portfolios fell in value by 10% in line with the IPD retailproperty index for the year. The German market showed slight yield compression in the first half of 2007, andlargely stable yields in the second half. Our German portfolio, which nowaccounts for 22% of our total exposure, has shown a £9.6m revaluation surplusfor the year. Portfolio Performance Almost all UK property portfolios will have had negative returns in 2007 due toadverse yield shift. Our portfolios have also suffered. The Mall's direct management model once again outperformed the IPD shoppingcentre index by 1.0% (IPD quarterly total return) at an ungeared level, adding to its five year track record of out performance. The Junction underperformed the IPD retail parks index, partly because of theconcentration of big box DIY anchors such as B&Q in its portfolio. It has alsoseen more adverse yield shift than the sector as a whole. Portfolio performances Geared Ungeared Benchmark Return Return Return (IRR) (IRR) (IRR) Mall 2005 22.8% 16.5% 16.3%Mall 2006 26.3% 17.6% 12.7%Mall 2007 (13.2%) (3.3%)** (4.3%)** Junction 2005 34.1% 23.3% 22.1%Junction 2006 18.3% 15.0% 14.7%Junction 2007 (34.0%) (16.8%) (10.2%)** X-Leisure 2005 28.3% 15.3% 12.0%X-Leisure 2006 30.4% 19.7% 12.0%X-Leisure 2007 (3.0%) 2.1% 12.0% German portfolio 2006 34.2% 15.2%German portfolio 2007 16.2% 7.5% Fix UK 2006 37.6% 20.8%*Fix UK 2007 (32.9%) (9.8%)* * LFL Return** IPD quarterly (total return) Recognising market concerns Over recent months we have been asked questions on the following issues, and we feel it is appropriate to address them within our results statement. 1. Fund redemptions: some open ended property funds are suffering from equity redemptions which are forcing them to sell. All three Capital & Regional funds are closed end and have long lives and therefore don't suffer this problem. 2. Defensive qualities of our portfolios: we aim to invest in property which is dominant in its local market and where there is a ready market for tenants and customers. We manage it intensively and believe that such property is likely to trade relatively well in an economic downturn. 3. Performance fees: the performance fee formula has earned us £161m over the last five years to 30 December 2006 and we are expecting to repay up to £53m as a result of the recent downturn in values. Now that full provision has been made, our performance fee rights should be seen as an opportunity to earn future fees rather than a liability 4. Banking arrangements: we are well aware of the potential impact of tightening credit conditions and falling property prices on our bank covenants. However at 30 December 2007 we had undrawn core revolving facilities of £114m and were in compliance with all the financial covenants in our banking agreements. More information is given on page 11. Outlook The property market is expecting further downward movement in property valuesover the next six months, and stabilisation followed by moderate growththereafter. The extent of this will depend on whether credit conditions ease andwhether the problems in financial markets have a significant impact on consumerspending. Our co-investing business model is capable of delivering enhanced returnsthroughout the property cycle. Valuations will rise and fall and with them ourperformance fees. But we have base fee and rental income which generates arecurring profit, and our specialist teams focussed on well orderedportfolios have every chance of outperforming. Financial reviewWilliam Sunnucks, Group Finance Director This section considers • The 2007 results, focussing on our key performance indicators• Balance sheet, debt and hedging• Corporate structure and share buybacks The 2007 Results We lay out below the Key Performance Indicators we use to monitor our financialperformance, and explain them in the paragraphs that follow. Key performance indicators 2005 2006 2007Scale of business:Property under management £5.1bn £6.5bn £6.1 bn Investment returnsTriple net diluted NAV per share £9.85 £12.72 £10.04Total return on equity 41% 32% (18%)Year end share price £8.68 £15.42 £3.92Total shareholder return 28% 81% (73%) ProfitabilityRecurring pre-tax profit £23.1m £32.3m £32.7mDividend per share 18p 26p 27pProfit or loss before tax £199m £251m (£167m) Scale of the business There were no major acquisitions during 2007. There was however significantasset management activity and recycling of capital as follows: • The Mall acquired three neighbouring properties in order to advance asset management schemes, and spent £66m on reconfigurations and redevelopments • Two significant disposals in the Junction fund (at Wembley and Worcester) reduced the fund's gearing. • The completion of the sale of Star City by the X-Leisure fund financed the acquisition of Cardigan Fields in Leeds and a commitment to buy a completed development in Bournemouth. • X-Leisure acquired two of the three Xscapes from the partnerships that developed them. C&R's interest in the fund increased from 10.6% to 19.4%. • We acquired 25 properties in the Fix portfolio bringing the total to 49 properties valued at £170m. • We acquired 6 properties in Germany for £63m increasing our portfolio to 50 properties, valued at £490m, with total floor space of 469,000 sq metres. Portfolio movements 2007 Acquisitions Disposals Revaluation Exchange Total movements Difference £m £m £m £m £m PUM at Jan 2007 6,457 Mall 145 - (254) - (109)Junction 68 (130) (305) - (367) X-Leisure 243 (86) (17) - 140 FIX UK portfolio 84 (1) (24) - 59 German portfolio 63 - 10 35 108 Joint ventures 42 (192) (3) - (153) -------- -------- -------- --------Movement in 2007 645 (409) (593) 35 -------- -------- -------- -------- -------PUM at Dec 2007 6,135 Investment returns Our revaluation deficit in 2007 was nearly identical to the surplus in 2006,supporting the view that 2006 was "a year too far". However, crucially for thefuture, our underlying profitability continues with recurring pre-tax profit of£32.7m and has been further diversified due to the growth of our Germanportfolio. Total returns 2005 2006 2007 £m £m £m Recurring pre-tax profit 23.1 32.3 32.7Revaluation change 153.9 166.7 (164.4)Performance fees 50.9 62.6 (52.8)Other non-recurring items (29.2) (10.7) 17.5Tax and reserves movements 4.4 (27.0) 1.9 ------- ------- -------Total returns 203.1 223.9 (165.1) ------- ------- ------- As % of opening equity 41% 32% (18%) The other non-recurring items are shown in detail in note 2 on pages 18 and 20. They include the mark to market of our interest rate swaps and the share ofperformance fee which we bear as investors in the funds. During the same two year period our triple net NAV per share increased from£9.85 to £10.04. Our 2007 £167m loss follows a four year period in which wemade gains of £664m. Profitability Our recurring pre-tax profit has remained stable at just under £33m. Recurring pre-tax profit 2005 2006 2007 £m £m £m Property investment UK 10.3 11.3 10.2Property investment Germany 0.9 5.8 9.6Managing property funds 10.2 13.4 10.8SNO!zone 1.7 1.8 2.1 ------- ------- -------Recurring pre-tax profit 23.1 32.3 32.7 ------- ------- ------- The German portfolio contributed £9.6m, up from £5.8m in 2006 due to the fullyear effect of the Weigelt portfolio acquisition in 2006 and further investmentin 2007. The UK property investment business bore larger interest charges on borrowingsto fund the equity we have invested in Germany and share buybacks. We estimatethe impact of these two items at £2.9m. Excluding these factors the profitsfrom the UK portfolio grew during the year. Dividend Our dividend has tripled over the last four years in line with our recurring profits. This years dividend distributes about 59% of our recurring pre-taxprofits. Dividend profile Actual Actual Actual 2005 2006 2007 pps pps pps Interim 7 9 10Final 11 17 17 ------- ------- -------Total 18 26 27 ------- ------- -------Increase 29% 44% 4%% of recurring profit 55% 58% 59% Earnings Businesses SNO!zone SNO!zone is the UK's premier real indoor snow slope operating business. Withvirtually no capital requirements, it has been generating strong cash flows andprofits since 2001. During 2007 it traded from three locations in Milton Keynes,Castleford and Braehead and generated profit as follows: SNO!zoneProfit and loss account 2005 2006 2007 £m £m £m Income 9.3 13.1 14.3Operating expenses (7.6) (10.4) (11.5) -------- -------- --------Cash profit 1.7 2.7 2.8Tenant incentives - (0.9) (0.7) -------- -------- --------Accounting profit 1.7 1.8 2.1 Capital & Regional Property Management (CRPM) This company earns fees from managing our funds and joint ventures and employsall our staff. Costs related to our own investment portfolio are allocated tothe property investment business. The profitability of the fund managementbusiness (excluding the £6.5m cost related to managing our own assets) can besummarised as follows: Property Management BusinessProfit and loss account 2005 2006 2007 £m £m £m Fixed fees 15.3 17.0 18.6Service charge fees 3.9 4.6 4.4Other fees 3.6 5.8 3.0Fixed management expenses* (12.6) (14.0) (15.2) ------- -------- --------Profit from management fees 10.2 13.4 10.8Performance fees 50.9 62.6 (52.8)Variable overhead - bonuses, CAP, LTIP (18.6) (18.3) 7.9Other non-recurring items - (2.1) - ------- -------- --------CRPM profit/(loss) before tax 42.5 55.6 (34.1) ------- -------- -------- * 30% (25% in 2005 and 2006) of overhead allocated to property investment business reflecting growth in Fix and Germany portfolios. The profit from our Property Management business relates to long term managementcontracts on the Mall, Junction and X-Leisure funds, expiring in 2016, 2011 and2018 respectively. CRPM profit, from management fees, fell in 2007 for several reasons: the level of transactions fell, there were no major acquisitions or new funds created and our management expenses were geared towards a growing portfolio. Performance fees CRPM receives performance fees from the funds it manages on a complex formula designed to give us a share of the fund's out performance over a three year period compared to a defined IPD index and an absolute 12% hurdle return. Fees can be positive or negative, but negative fees are subject to a maximum amount. Over the five years to 30 December 2006 we earned £161m in performance fees. Wetook credit for the fees in the third and final year of each performance periodand no credit was taken for the contribution positive past performance wouldmake to performance periods ending in future years. Despite this carry forward,the unexpected and rapid drop in property values in the last quarter of 2007resulted in a negative calculation for 2007, driven by a substantial gap betweenthe 12% absolute performance hurdle and the negative geared returns in the funds. The amount to be repaid is restricted to the amount paid in the previous two years. We have accounted for the full amount up to this maximum for both Mall and Junction. • Mall: we earned £36m in 2006 which was paid by the Fund in December 2007. We expect to pay back £4m in December 2008. A portion of the remainder will be repayable in December 2009 dependent on 2008 performance; the maximum amount will only be reached if there is more than 70bps further adverse yield shift. We have provided in full on this basis, although such a big shift is at the outer end of market expectations. • Junction: we earned £16.6m during 2006, but when it was due in December 2007 we postponed payment because it was becoming clear that much of it would be repayable - £14m in December 2008 and the balance in December 2009. We do not expect to make any further payments. • X-Leisure: we earned a performance fee of £5.3m for 2007, but no credit has been taken for this amount due to the likelihood of claw back. • Please see contingent liability note 7 on page 27. Performance fee history 2002 2003 2004 2005 2006 2007 Recognised £m £m £m £m £m £m in 2007 £m Mall 3 11 23 30 36 (4) (36)Junction 2 7 17 17 (14) (17)X-Leisure 1 4 10 ------ ------ ------ ------ ------ ------ -------Total 3 13 31 51 63 (18) (53) ------ ------ ------ ------ ------ ------Less backcharge - C&R share as investor 18Less net adjustment to management incentives 8 -------NAV effect £m (27) -------NAV effect £ per share (0.38) ------- The impact on C&R is mitigated by the benefit it receives from claw back as aninvestor and by the adjustment to management incentives. The net impact on NAVis shown above at 38p per share. Balance sheet, debt and hedging Three balance sheet presentations We look at our balance sheet in three ways: • the enterprise balance sheet shows everything we manage• the "see through" balance sheet shows our share of each portfolio• the statutory balance sheet net of fund and JV debt, as required by the accounting rules Three balance sheets at 30 December 2007 Enterprise See through StatutoryFunds £m £m £m Mall 3,111 754 344 Junction 1,197 327 166 X-Leisure 945 183 90Other portfolios Trade Parks 169 169 169 Germany 490 452 490Joint ventures Xscape Braehead 72 36 5 Manchester Arena 67 19 5 Cardiff 29 14 (1)Wholly owned Hemel Hempstead 17 17 17 Gt Northern 95 95 95 -------- --------- --------Total property 6,192 2,066 1,380 Working capital etc. 45 (29) (52) Debt (3,586) (1,334) (625) -------- --------- --------Net assets 2,651 703 703 -------- --------- -------- C&R shareholders 703 703 703 Fund investors 1,948 -------- --------- --------Total equity 2,651 703 703 -------- --------- -------- Leverage (LTV) 58% 65% 45% Note: This table shows accounting figures, which treat head leases and tenantincentives differently. They differ from the valuation figures shown on page 7. The key judgements in our balance sheet relate to: 1. Property valuations: all of which are carried out by independent valuers. 2. Development issues: it often takes some years after a development is completed before all commercial issues are resolved. 3. Tax provisioning: judgement is needed on the correct level of provisioning for tax payable over "open" years where the final figures have not yet been agreed with the tax authorities. 4. Performance fee accounting: where events over a five year period can affect the amount earned in any one year, and some judgement about future performance is required. Debt Debt at 30 December 2007 Debt £m Average % Fixed Duration of Duration to interest rate fixing loan expiry % (months) (months)Core revolvingcredit facility 61 5.69 107% 24 38Great Northern debt 69 5.70 100% 34 34Hemel Hempstead debt 12 5.52 100% 9 21Victoria debt 8 7.48 - - 22Fix UK 120 6.49 72% 39 83Germany 355 4.68 100% 44 44 ------ ------- ------ ------- -------Group debt* 625 5.28 94% 39 49 ------ ------- ------ ------- -------JV debt (our share) 55 6.38 68% 45 51German minorities (29) 4.68 100% 44 44Mall (24.2% share) 412 5.48 74% 52 52Junction (27.3% share) 177 5.35 90% 49 39X-Leisure (19.4% share) 94 6.06 81% 33 46 ------ ------- ------ ------- -------Off balance sheet debt 709 5.63 77% 49 51 ------ ------- ------ ------- -------Total See through debt 1,334 5.46 85% 44 50 * before loan amortisation costs. The main reason for the increase in our balance sheet debt from £457m to £625mis the building up of the Fix and German portfolios. • Our German portfolio supports £355m of debt, which is non-recourse to the UK group. This portfolio has strong cash flows secured on good covenants and values have been stable. The cash flows are fully able to support the debt, which stands at 72% LTV. • The Fix portfolio has become a fund since the year end, removing £120m of debt from our balance sheet and adding £33m of cash for the sale of 80% of the equity. We remain exposed to 20% of the bank debt on a see through basis. The remaining £150m is supported mainly by the recurring cash flows from GreatNorthern, fund units, CRPM and SNO!zone. We have very little debt falling due for refinancing over the next two years,although we plan to extend the £8.4m debt secured on 10 Lower Grosvenor Place,London, SW1, this year. Treasury statistics Treasury statistics (see through basis) 2005 2006 2007 Year end debt• Balance sheet debt* £396m £457m £625m• C&R share of all debt £892m £1,138m £1,334m % of debt with fixed or swapped interest rates 75% 82% 85%Weighted average duration of hedge (months) 52 48 44Weighted average interest rate % 5.10% 5.23% 5.46%Weighted average interest margin % 0.74% 0.67% 0.71Interest cover (Recurring PBIT / I) 1.54 1.58 1.48% of net Euro denominated assets hedged 75% 75% 66%Fair value of interest rate swaps (before tax) (6.5) 17.0 11.8Fair value of fixed loans (before tax) 0.5 3.1 4.4 * Before loan amortisation costs We continue to hedge a large portion of our exposure to interest rate andcurrency movements. Interest rate swaps cover 85% of our borrowings for anaverage duration of 44 months on a see through basis. A forward exchangecontract covers 66% of the net asset exposure of the German portfolio whichis denominated in euros. Average interest costs rose slightly at the year end due to a short term rise inLIBOR reflecting tight credit conditions in the banking market. Cash and debt management At the year end, we had £37m in cash and £114m available in undrawn core revolving credit facilities. This availability or "headroom" increased with the formation of the FIX fund, which generated cash of about £33m. Our wholly owned properties are financed with conventional secured debt. We useour central revolving credit facility to fund fluctuations or shortfalls. Ifthere is a shortage of cash or covenants are tight in these portfolios, we havethe option of injecting equity. Joint ventures normally have their own debt. The owners (including C&R) givelimited guarantees for cost over-runs and interest shortfall but not for theprincipal owing. Fund cash is managed entirely separately from C&R's own money. Fund banks relyon the portfolios to support the debt rather than the property manager (C&R) orthe fund manager (Morley Fund Management/Hermes). Financial covenants At the year end we complied with all our financial covenants. The most importantcovenants relate to the interest cover ratio (ICR) which should not fall below acertain level. This level ranges from 100% to 160% depending on thecharacteristics of the portfolio. We also have covenants relating to the Loan toValue ratio, (LTV covenants) which must not be allowed to rise above a certainlevel. Our LTV covenants were met without difficulty at the year end. Fund debt The three funds each have their own financial covenants. More significant thanthe bank covenants however is the desire of the institutional investors whoinvest in our funds to limit leverage to 60% LTV in the case of the Mall andJunction funds and 70% in the case of X-Leisure. Further decreases in asset values will put pressure on these covenants. Thefunds have a number of options including realisation of assets to ensure theyremain within the agreed covenants. The Mall fund has issued £1.4bn in Mall bonds, which have an ICR covenant at130% but no direct LTV covenant. The ICR is currently 170-180%, comfortably overthe limit. The interest rate on these bonds is advantageous in current marketconditions, and it is a priority not to breach any of the covenants associatedwith it. Corporate Structure and share buybacks Tax Our corporate structure remains tax efficient under current legislation. During2007 we have minimal UK tax payable. We have tax losses arising from thenegative performance fees of around £40m which may be available for offsetagainst future profits, but we haven't carried a deferred tax asset for thisThe UK tax authorities are currently consulting on changes which could affectour operating model going forward from April 2009, but it isn't clear at thisstage exactly how the proposed legislation might work, or whether our assetswould be impacted by the changes. In Germany we currently pay no cash tax but provide deferred tax at about 16% on tax depreciation allowances and revaluations. Returning capital During summer 2007 we returned £28m of capital through the repurchase of1,575,000 CULS and 1,442,598 shares. This continued the Company's long trackrecord of buying back shares when the opportunity arises. Since 2000, we havespent £198m on share and CULS buybacks, while expanding the property under management from £1.1bn to £6.1bn. In September 2007, we served notice on the holders of the last 0.1m CULS to force conversion into C&R shares. At the year end no CULS were outstanding. Final dividend 2007 timetableRecord date 18 April 2008Last day to receive DRIP mandates 30 May 2008Dividend warrants posted 12 June 2008Payment date/shares purchased 13 June 2008Certificates/purchase statements dispatched 18 June 2008CREST accounts credited 19 June 2008 Consolidated income statementFor the year ended 30 December 2007 Unaudited Audited 2007 2006 Notes £m £m Rents, management fees and other revenue 86.8 69.5Performance fees (52.8) 62.6 -------- -------Revenue 34.0 132.1Cost of sales (19.1) (15.5) -------- -------Gross profit 14.9 116.6 Administrative costs (13.7) (39.0)Share of (loss)/profit in joint ventures andassociates 3a (119.2) 164.6(Loss)/gain on revaluation of investment properties (14.8) 26.0Profit on sale of properties and investments 1.8 6.3 -------- -------(Loss)/profit on ordinary activities before financing (131.0) 274.5 Finance income 3.5 2.0Finance costs (39.5) (25.6) -------- -------(Loss)/profit before taxation (167.0) 250.9 -------- -------Current tax 3.9 (16.5)Deferred tax (3.7) (12.1) -------- -------Tax credit/(charge) 0.2 (28.6) -------- -------(Loss)/profit for the year (166.8) 222.3 -------- ------- Basic (loss)/earnings per share 6a (236)p 317pDiluted (loss)/earnings per share 6a (236)p 311p -------- -------All results derive from continuing activities Consolidated balance sheetAs at 30 December 2007 Unaudited Audited 2007 2006 Notes £m £mNon-current assetsInvestment property 678.5 511.4Interest in long leasehold property 15.6 16.0Goodwill 12.2 12.2Plant and equipment 1.5 1.0Investments 0.3 0.2Receivables 7.2 -Investment in associates 3c 599.4 685.4Investment in joint ventures 4b 12.0 67.6 --------- ---------Total non-current assets 1,326.7 1,293.8 --------- ---------Current assetsTrading property assets 95.9 94.4Receivables 19.9 87.9Tax recoverable 1.6 1.1Cash and cash equivalents 37.1 35.5 --------- ---------Total current assets 154.5 218.9 --------- ---------Total assets 1,481.2 1,512.7 --------- ---------Current liabilitiesTrade and other payables (102.4) (69.4)Current tax liabilities (18.4) (25.5) --------- --------- (120.8) (94.9) --------- ---------Non-current liabilitiesBank loans (622.4) (456.8)Convertible subordinated unsecured loan stock - (1.3)Other payables (17.5) (32.8)Deferred tax liabilities (17.5) (13.8) --------- ---------Total non-current liabilities (657.4) (504.7) --------- ---------Total liabilities (778.2) (599.6) --------- ---------Net assets 703.0 913.1 --------- ---------EquityCalled-up share capital 7.1 7.2Share premium account 219.7 219.5Revaluation reserve 2.4 2.7Other reserves 10.9 9.6Capital redemption reserve 4.4 4.3Own shares held (8.7) (6.9)Retained earnings 467.2 676.7 --------- ---------Equity shareholders' funds 703.0 913.1 --------- --------- Triple net, diluted net assets per share 5 £10.04 £12.72 EPRA diluted net assets per share 5 £10.08 £12.75 --------- --------- Consolidated statement of recognised income and expenseFor the year ended 30 December 2007 Unaudited Audited 2007 2006 £m £m Foreign exchange translation differences 7.6 (0.7)Revaluation (loss)/gain on owner occupied property (0.3) 2.3Net investment hedge (5.6) - -------- ------- 1.7 1.6(Loss)/profit for the year (166.8) 222.3 -------- -------Total recognised income and expense (165.1) 223.9 -------- ------- Attributable to:Equity shareholders (165.1) 223.9 -------- ------- Reconciliation of movement in equity shareholders' funds Unaudited AuditedUnaudited 2007 2006 £m £m Opening equity shareholders' funds 913.1 707.7Issue of shares 0.2 2.7Acquisition of own shares - (8.3)Share buy back and cancellation (17.2) -LTIP credit in respect of LTIP charge 0.2 2.1Arising on conversion/repurchase of CULS (9.0) (0.8)Amortisation of IFRS 1 reserve (0.1) (0.1) -------- ------- 887.2 703.3Total recognised income and expense (165.1) 223.9 -------- ------- 722.1 927.2Dividends paid (19.1) (14.1) -------- -------Closing equity shareholders' funds 703.0 913.1 -------- ------- Consolidated cash flow statementFor the year ended 30 December 2007 Unaudited Audited 2007 2006 £m £m Net cash generated from operations 62.6 89.5 -------- ------- Distributions received from joint ventures and associates 25.6 21.9Interest paid (30.7) (22.1)Interest received 2.7 1.9Income taxes paid (3.8) (3.8) -------- -------Cash flows from operating activities 56.4 87.4 -------- ------- Investing activitiesAcquisitions of investment properties (62.8) (251.4)Capital expenditure on investment properties (15.2) (2.0)Acquisitions and disposals of other fixed assets (1.1) -Acquisition of companies (39.4) -Cash acquired in business combinations 1.0 -Proceeds from sale of investment and trading properties 1.0 111.0Proceeds from sale of investments 0.2 -Investment in joint ventures (3.3) (8.1)Loans to joint ventures (6.1) (0.7)Loans repaid by joint ventures 0.7 -Disposal of units in associated entity - 30.0Acquisitions and disposals - (14.4) -------- -------Cash flows from investing activities (125.0) (135.6) -------- -------Financing activitiesProceeds from the issue of ordinary share capital 0.1 0.4Purchase of own shares (1.3) (8.3)Share buy backs and cancellation (17.2) -Repurchase of CULS (10.5) -Bank loans draw down 172.3 639.4Bank loans repaid (48.5) (575.0)Loan arrangement costs (0.9) -Settlement of foreign exchange forward (4.6) -Dividends paid to minority interests (1.4) (0.6)Equity dividends paid (19.1) (14.1) -------- -------Cash flows from financing activities 68.9 41.8 -------- -------Net increase/(decrease) in cash and cash equivalents 0.3 (6.4) Cash and cash equivalents at beginning of year 35.5 40.1Effect of foreign exchange rate changes 1.3 1.8 -------- -------Cash and cash equivalents at end of year 37.1 35.5 -------- ------- 1. Notes to the accounts The financial information set out in the announcement does not constitute thecompany's statutory accounts for the years ended 30 December 2006 or 2007. Thefinancial information for the year ended 30 December 2006 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those accounts; their report wasunqualified, did not draw attention to any matters by way of emphasis withoutqualifying their report and did not contain a statement under s237(2) or (3)Companies Act 1985. The audit of the statutory accounts for the year ended 30December 2007 is not yet complete. These accounts will be finalised on the basisof the financial information presented by the directors in this preliminaryannouncement and will be delivered to the Registrar of Companies following thecompany's annual general meeting. 2. Segmental analysis 2a. Business segments on a see through basis We show below the segmental profit on a non-statutory see through basis, as webelieve that this is most informative for shareholders. The statutorydisclosures will be included in the annual report. The Group operates in two main business segments, an assets business and anearnings business. The assets business consists of property investmentactivities and the earnings business consists of property management activitiesand the ski slope business of SNO!zone. The businesses are the basis on whichthe Group reports its primary business segments. Unaudited Assets Earnings Year to Property Property Property 30 December investment investment management 2007 UK Germany UK SNO!zone Total2007 Note £m £m £m £m £m Net rents 2b 70.0 24.9 - - 94.9Net interest 2b (54.2) (14.4) - - (68.6) -------- -------- --------- ------- --------Contribution 2b 15.8 10.5 - - 26.3Management fees - - 26.0 - 26.0SNO!zone income - - - 14.3 14.3SNO!zone expenses - - - (12.2) (12.2)Management expenses (5.6) (0.9) (15.2) - (21.7) -------- -------- --------- ------- --------Recurring pre-tax profit 10.2 9.6 10.8 2.1 32.7 Performance fees/(clawback) - - (52.8) - (52.8)Benefit of performance fees 3c 18.1 - - - 18.1Variable overhead credit - - 7.9 - 7.9Revaluation of investment properties (174.0) 9.6 - - (164.4)Profit on disposals 1.6 - - - 1.6(Loss)/gain on financial instruments (8.8) 1.8 - - (7.0)Other non-recurring items (3.1) - (3.1) -------- -------- --------- ------- --------(Loss)/profit before tax (152.9) 17.9 (34.1) 2.1 (167.0) -------- -------- --------- -------Tax 0.2 --------(Loss)/profit after tax (166.8) -------- Net assets/(liabilities) at 30 Dec 2007 613.3 123.8 (34.0) (0.1) 703.0 -------- -------- --------- ------- -------- 2b. Contribution Unaudited Contribution Year to 30 December Gross Property Void Net Net 2007 Rent Costs Costs rent interest Total2007 Note £m £m £m £m £m £m Mall (C&R share: 24.2%) 1 44.2 (10.1) (1.8) 32.3 (19.6) 12.7Junction (C&R share: 27.3%) 1 15.7 (2.9) (0.3) 12.5 (9.5) 3.0X-Leisure (C&R share: 19.4%) 1 9.9 (2.1) (0.3) 7.5 (5.1) 2.4 ------ ------- ------ ------ ------- --------Total associates 3c 69.8 (15.1) (2.4) 52.3 (34.2) 18.1 ------ ------- ------ ------ ------- -------- Xscape Braehead (C&R share 50%) 1 2.0 (0.4) (0.1) 1.5 (1.9) (0.4)Manchester Arena (C&R share 30%) 1 1.6 (0.3) (0.1) 1.2 (0.9) 0.3Others (C&R share: 50%) 1 0.9 (0.4) (0.1) 0.4 (0.4) - ------ ------- ------ ------ ------- --------Total joint ventures 4b 4.5 (1.1) (0.3) 3.1 (3.2) (0.1) ------ ------- ------ ------ ------- -------- Statutory information Other UK 1.0 - - 1.0 (6.1) (5.1)Fix UK 9.5 (1.2) (0.4) 7.9 (6.7) 1.2Germany 29.6 (4.6) (0.1) 24.9 (14.4) 10.5 ------ ------- ------ ------ ------- --------Total rental incomeinvestment property 40.1 (5.8) (0.5) 33.8 (27.2) 6.6Great Northern2 6.4 (0.3) (0.4) 5.7 (4.0) 1.7 ------ ------- ------ ------ ------- --------Total wholly owned rental income 46.5 (6.1) (0.9) 39.5 (31.2) 8.3 ------ ------- ------ ------ ------- --------Total on a see through basis 2a 120.8 (22.3) (3.6) 94.9 (68.6) 26.3 ------ ------- ------ ------ ------- -------- 1 Capital & Regional's share at end of year.2 Great Northern is carried as a trading property in the balance sheet. 2a. Segmental analysis Audited Year to Property Property Property 30 December investment investment management 2006 UK Germany UK SNO!zone Total2006 Note £m £m £m £m £m Net rents 2b 65.5 11.5 - - 77.0Net interest 2b (49.6) (5.7) - - (55.3) -------- -------- --------- ------- ---------Contribution 2b 15.9 5.8 - - 21.7Management fees - - 27.4 - 27.4SNO!zone income - - - 13.1 13.1SNO!zone expenses - - - (11.3) (11.3)Management expenses (4.6) - (14.0) (18.6) -------- -------- --------- ------- ---------Recurring pre-tax profit 11.3 5.8 13.4 1.8 32.3 Performance fees - - 62.6 - 62.6Cost of performance fees 3c (20.1) (0.3) - - (20.4)Variable overhead - - (18.3) - (18.3)Revaluation of investment properties 149.5 17.2 - - 166.7Profit on disposals 11.1 - - - 11.1Gain on interest rate swaps 23.5 - - - 23.5Other non-recurring items (2.0) (2.5) (2.1) - (6.6) -------- -------- --------- ------- ---------Profit before tax 173.3 20.2 55.6 1.8 250.9 -------- -------- --------- -------Tax (28.6) ---------Profit after tax 222.3 ---------Net assets/(liabilities) at 30 December 2006 774.9 103.5 35.0 (0.3) 913.1 -------- -------- --------- ------- --------- 2b. Contribution Audited Contribution Year to 30 December Gross Property Void Net Net 2006 Rent Costs Costs rent interest Total2006 Note £m £m £m £m £m £m Mall (C&R share: 24.2%) 1 45.1 (11.5) (1.5) 32.1 (18.0) 14.1Junction (C&R share: 27.3%) 1 14.5 (3.1) (0.4) 11.0 (9.2) 1.8X-Leisure (C&R share: 10.6%) 1 4.9 (0.8) (0.2) 3.9 (2.5) 1.4 ------ ------- ------ ------ ------- --------Total associates 3c 64.5 (15.4) (2.1) 47.0 (29.7) 17.3 ------ ------- ------ ------ ------- -------- Xscape (C&R share)1 6.6 (1.2) (0.4) 5.0 (4.8) 0.2Others (C&R share: 30-50%) 1 0.3 (0.1) - 0.2 (0.1) 0.1 ------ ------- ------ ------ ------- --------Total joint ventures 4b 6.9 (1.3) (0.4) 5.2 (4.9) 0.3 ------ ------- ------ ------ ------- -------- Statutory information Other UK 4.6 1.3 - 5.9 (8.2) (2.3)Fix UK 4.7 (1.1) (0.4) 3.2 (3.0) 0.2Germany 14.3 (2.8) - 11.5 (5.7) 5.8 ------ ------- ------ ------ ------- --------Total rental incomeinvestment property 23.6 (2.6) (0.4) 20.6 (16.9) 3.7Great Northern2 5.3 (0.5) (0.6) 4.2 (3.8) 0.4 ------ ------- ------ ------ ------- --------Total wholly ownedrental income 28.9 (3.1) (1.0) 24.8 (20.7) 4.1 ------ ------- ------ ------ ------- --------Total 2a 100.3 (19.8) (3.5) 77.0 (55.3) 21.7 ------ ------- ------ ------ ------- -------- Associates and Joint Ventures are all held within the United Kingdom.1 Capital & Regional's share at end of year.2 Great Northern is carried as a trading property in the balance sheet. 3. Associates and joint ventures Unaudited Audited3a. Share of (loss)/profit Year to Year to 30 December 30 December 2007 2006 Note £m £m -------------- ----------Associates 3b, 3c (118.1) 153.4Joint ventures 4a, 4b (1.1) 11.2 -------------- ---------- (119.2) 164.6 -------------- ---------- 3b. Investment in associates Unaudited Audited 30 December 30 December 2007 2006 Note £m £m At the beginning of the year 685.4 583.7Investment in X-Leisure Fund 53.9 -Disposal of Mall units - (30.7)Dividends and capital distributions received (21.8) (21.0)Share of results 3a, 3c (118.1) 153.4 ---------- ----------At the end of the year 3c 599.4 685.4 ---------- ---------- 3c. Analysis of investment in associates Unaudited Audited Year to Year to 30 December 30 December The Mall The Junction X-Leisure1 2007 2006 LP LP LP Total Total Note £m £m £m £m £mIncome statement (100%)Revenue 182.5 57.0 52.0 291.5 275.5Property expenses (33.2) (2.6) (6.2) (42.0) (42.5)Management expenses (16.0) (9.1) (6.4) (31.5) (30.9) -------- --------- -------- -------- --------Net rents 133.3 45.3 39.4 218.0 202.1Net interest payable (81.0) (36.2) (26.6) (143.8) (127.5) -------- --------- -------- -------- --------Contribution 52.3 9.1 12.8 74.2 74.6Performance fees 5.8 7.4 (6.5) 6.7 (84.4)C&R accounting policy adjustment2 43.4 15.4 6.5 65.3 -Revaluation of investment properties (257.5) (299.8) (16.6) (573.9) 559.3(Loss)/profit on sale of investmentproperties (0.1) (16.2) - (16.3) 10.7Fair value of interest rate swaps (11.5) (6.6) (2.3) (20.4) 86.3 -------- --------- -------- -------- --------(Loss)/Profit before and after tax (100%) (167.6) (290.7) (6.1) (464.4) 646.5 -------- --------- -------- -------- -------- Balance sheet (100%)Investment property 3,111.3 1,196.5 945.2 5,253.0 5,567.1Current assets 178.6 90.2 42.5 311.3 293.8Current liabilities (179.0) (36.5) (42.7) (258.2) (262.0)Non-current liabilities (1,690.8) (646.0) (483.3) (2,820.1) (2,665.6) -------- --------- -------- ---------- ----------Net assets (100%) 1,420.1 604.2 461.7 2,486.0 2,933.3 -------- --------- -------- ---------- ---------- C&R interest at year end 24.2% 27.3% 19.4%C&R interest at start of year 24.2% 27.3% 10.6%C&R average interest during theyear 24.2% 27.3% 18.8%Group share of Revenue 2b 44.2 15.7 9.9 69.8 64.5 -------- --------- -------- -------- --------Net rents 2b 32.3 12.5 7.5 52.3 47.0Net interest payable 2b (19.6) (9.5) (5.1) (34.2) (29.7) -------- --------- -------- -------- --------Contribution 2b 12.7 3.0 2.4 18.1 17.3Performance fees 1.4 2.0 (1.2) 2.2 (20.1)C&R accounting policy adjustment2 10.5 4.2 1.2 15.9 -Revaluation of investment properties (59.3) (82.0) (5.2) (146.5) 133.9(Loss)/profit on sale of investment properties - (2.7) - (2.7) 2.1Fair value of interest rate swaps (2.8) (1.8) (0.5) (5.1) 20.2 ------- --------- -------- -------- --------(Loss)/Profit for the year 3a, 3b (37.5) (77.3) (3.3) (118.1) 153.4 ------- --------- -------- -------- -------- Investment property 754.2 326.9 183.3 1,264.4 1,286.8Current assets 43.2 24.6 8.2 76.0 68.0Current liabilities (43.4) (9.9) (8.3) (61.6) (58.8)Non-current liabilities (409.8) (176.5) (93.7) (680.0) (611.2) -------- --------- -------- -------- --------Associate net assets 344.2 165.1 89.5 598.8 684.8 -------- --------- -------- -------- --------Unrealised profit on sale of property to associate (0.3) 0.9 - 0.6 0.6 -------- --------- -------- -------- --------Group share of associate net assets 3b 343.9 166.0 89.5 599.4 685.4 -------- --------- -------- -------- -------- 1 X-Leisure is accounted for as an associate as Capital & Regional hassignificant influence arising from its membership of the General Partner Board.The X-Leisure results have been adjusted, to conform to Group accountingpolicies, to include the sale of Star City which did not complete until afterthe prior year end. 2 The results of the three associates above have been adjusted to ensure theconsistency of accounting in relation to the estimated repayment of performancefees between the Group and its associates. 4a. Investment in joint ventures Unaudited Audited 30 December 30 December 2007 2006 Note £m £m At the beginning of the year 67.6 49.8Net assets disposed of on sale of XscapeMilton Keynes and Xscape Castleford to X-Leisure Fund (51.3) -Investment in joint ventures 3.3 8.1Dividends and capital distributions receivable (6.5) (1.5)Share of results 3a, 4b (1.1) 11.2 ---------- --------At the end of the year 4b 12.0 67.6 ---------- -------- 4b. Analysis of investment in joint ventures Unaudited Audited Year to Year to Xscape 30 December 30 December Braehead Manchester 2007 2006 Partnership Arena Others1,2 Total Total Note £m £m £m £m £mIncome statement (100%) Revenue 4.0 5.3 1.5 10.8 13.2Property expenses (0.7) (1.2) (0.6) (2.5) (2.8)Management expenses (0.2) - (0.1) (0.3) (0.3) -------- -------- -------- -------- --------Net rents 3.1 4.1 0.8 8.0 10.1Net interest payable (3.8) (3.1) (0.7) (7.6) (8.8) -------- -------- -------- -------- --------Contribution (0.7) 1.0 0.1 0.4 1.3Revaluation of investment properties (5.7) (2.5) 0.1 (8.1) 13.8Income and fair value movements on financial asset - - 4.8 4.8 5.5Fair value of interest rate swaps (0.4) (0.3) - (0.7) 2.9 -------- -------- -------- -------- --------(Loss)/Profit before and after tax (100%) (6.8) (1.8) 5.0 (3.6) 23.5 -------- -------- -------- -------- -------- Balance sheet (100%)Investment property 71.4 67.3 28.9 167.6 320.7Current property assets - - - - 0.5Current assets 13.3 4.5 9.7 27.5 42.9Other financial assets - - 0.4 0.4 -Current liabilities (8.0) (5.3) (9.8) (23.1) (29.6)Non-current liabilities (67.0) (47.5) (26.4) (140.9) (198.0) -------- -------- -------- -------- --------Net assets (100%) 9.7 19.0 2.8 31.5 136.5 -------- -------- -------- -------- -------- C&R interest at year end 50.00% 30.00% 50-66.67%C&R interest at start of year 50.00% 30.00% 50-66.67%C&R average interest during the year 50.00% 30.00% 50-66.67% Group share of Revenue 2b 2.0 1.6 0.9 4.5 6.9 -------- -------- -------- -------- --------Net rents 2b 1.5 1.2 0.4 3.1 5.2Net interest payable 2b (1.9) (0.9) (0.4) (3.2) (4.9) -------- -------- -------- -------- --------Contribution 2b (0.4) 0.3 - (0.1) 0.3Revaluation of investment properties (2.9) (0.8) 0.6 (3.1) 6.8Income and fair value movements on financial asset - - 2.4 2.4 2.7Fair value of interest rate swaps (0.2) (0.1) - (0.3) 1.4 -------- -------- -------- -------- --------(Loss)/Profit for the year 4a (3.5) (0.6) 3.0 (1.1) 11.2 -------- -------- -------- -------- -------- Investment property 35.7 20.2 14.4 70.3 158.3Current property assets - - - - 0.3Current assets 6.7 1.4 4.8 12.9 21.5Other financial assets - - 0.2 0.2 -Current liabilities (4.0) (1.6) (4.9) (10.5) (16.1)Non-current liabilities (33.5) (14.3) (13.1) (60.9) (96.4) -------- -------- -------- -------- --------Group share of joint venture net assets 4a 4.9 5.7 1.4 12.0 67.6 -------- -------- -------- -------- -------- 1 Principally the joint ventures are Auchinlea with British Land plc (C&R share 50%) and at Cardiff, but also includes the results of Xscape Milton Keynes and Xscape Castleford up to the date of sale to the X-Leisure Fund (23 February 2007). 2 Since the date of sale in 2004 of its interest in Glasgow Fort the Group has received a total of £8.4m further profits from its remaining interest in the joint venture. Further profits are potentially receivable and are largely dependent upon planning consent being obtained for future phases and the letting of units at above target rents. We have estimated our share of the fair value of the right to receive these future profits at 30 December 2007 at £0.2m. The value reflects our assessment of the considerable uncertainty surrounding the receipt of further amounts and the fact that there is no ready market for such assets. In accordance with current accounting standards we have recognised this right as a financial asset in our 30 December 2007 balance sheet. In prior years we have disclosed the right as a contingent asset and the effect of this accounting changes in our 2007 financial statements is not considered material to our prior year results. 5. Net assets per share The European Public Real Estate Association ("EPRA") has issued recommendedbases for the calculation of certain net asset per share information and this isshown in the following notes. Unaudited Audited 30 December 2007 30 December 2006 Net Net Net Number assets assets assets of shares per share per share £m m £ £ Basic 703.0 71.1 9.89 12.61Own shares held - (0.9)Fair value of fixed rate loans (net of tax) 3.2 -Fair value of trading properties 1.6 -Dilutive share options 1.1 0.4 ------- -------- ------- --------Triple net diluted net assets per share 708.9 70.6 10.04 12.72Exclude fair value of derivatives notdesignated as financial instruments (8.5) -(net of tax)Exclude fair value of fixed (3.2) -rate loans (net of tax)Exclude deferred tax on unrealised gains and capital allowances 14.7 - ------- -------- ------- --------EPRA diluted net assets per share 711.9 70.6 10.08 12.75 ------- -------- ------- -------- 6. Earnings per share 6a. The European Public Real Estate Association ("EPRA") has issued recommendedbases for the calculation of certain earnings per share information and theseare shown in the following tables. Weighted average Pence Earnings number per2007 £m of shares share Weighted average number of shares 71.7Own shares held (0.9) ------- Basic (166.8) 70.8 (236) ------- ------- -------Adjusted basic (166.8) 70.8 (236)Dilutive share options - -Conversion of Convertible Unsecured Loan Stock - - ------- ------- -------Diluted (166.8) 70.8 ------- ------- Revaluation movements on investment properties,development properties and other investments 164.4 232Profit on disposal of investment properties (net of tax) (1.1) (2)Movement in fair value of financial instruments 7.0 10Deferred tax charge (3.0) (4) ------- -------EPRA diluted 0.5 1Performance fee clawback (net of back charge) 26.8 38 ------- -------Adjusted EPRA diluted 27.3 39 ------- ------- Weighted average Pence Earnings number per2006 £m of shares share Weighted average number of shares 71.5Own shares held (1.3) ------- Basic 222.3 70.2 317 ------- ------- -------Adjusted basic 222.3 70.2 317Dilutive share options - 0.5Conversion of Convertible Unsecured Loan Stock 0.2 0.9 ------- ------- -------Diluted 222.5 71.6 311 ------- Revaluation movements on investment properties,development properties and other investments (166.7) (233)Profit on disposal of investment properties (net of tax) (10.8) (15)Movement in fair value of interest rate swaps (23.5) (33)Deferred tax charge 11.7 16 ------- -------EPRA diluted 33.2 46 ------- ------- The calculation includes the full conversion of the Convertible Unsecured LoanStock where the effect on earnings per share is dilutive. The ConvertibleUnsecured Loan Stock charge added back to give the diluted earnings figures isnet of tax at the effective tax rate for the year. 6b Reconcilliation of earnings figures included in EPS calculation to the income statement 2006 2007 Movement Movement in fair in fair 2006 value of 2007 2007 value of 2006 Profit interest Revaluation Profit on interest Revaluation on rate movements disposal rate swaps movements disposal swaps Note £m £m £m £m £m £m Share of profits 3c (146.5) (2.7) (5.1) 133.9 2.1 20.2associatesShare of profitsof joint ventures 4b (3.1) 2.4 (0.3) 6.8 2.7 1.4Wholly owned (14.8) 1.8 (1.6) 26.0 6.3 1.9Tax effect - (0.4) - - (0.3) - ------ ------ ------ ------ ------ ------Total per EPScalculation (164.4) 1.1 (7.0) 166.7 10.8 23.5 ------ ------ ------ ------ ------ ------ 7. Contingent liability CRPMs property management agreements provide that the amount of negativeperformance fee in any year is limited to the amount paid for the previous twoyears. The Fund and the Group are jointly seeking clarification on how thislimit is applied. On present forecasts and an alternative interpretation of the agreement, CRPM could be exposed to a further £17m over and above the amountalready in the 2007 accounts. After offsetting the benefit we get as investorsand the reduction in management incentives the net impact would be £6.7m or9.5p per share. Portfolio information - Unaudited Portfolio under management*# 30 December 30 December 30 December 30 December 31 December 2007 2006 2005 2004 2003 £m £m £m £m £m Investment properties 679 512 320 83 52Trading property 96 94 94 8 8The Mall Fund 3,016 3,125 2,338 2,099 1,243The Junction Fund 1,223 1,590 1,459 1,010 757X-Leisure Fund 947 807 702 597 501Other joint ventures 174 329 226 226 332 ------------ -------- -------- -------- --------Total 6,135 6,457 5,139 4,023 2,893 ------------ -------- -------- -------- -------- Properties under management above are shown at valuation, except for tradingproperty which is held at cost. * Accounting for head leases that are deemed to be finance leases are not included in the above figures. # The treatment required by IFRS of rent free periods, capital contributions and leasing costs are not included in the above figures. Fund portfolio information (100% figures) - UnauditedAs at December 2007 The Mall The Junction X-Leisure German FIX UK Portfolio Physical data Number of core properties 24 14 19 50 49 Number of lettable units 2,504 223 365 193 241 Lettable space (sq feet'000s) 8,668 3,365 3,677 5,044 1,585 Valuation data Properties at market value (£m) 3,016 1,223 947 490 170 2007 valuation movement(£m) (257.5) (299.8) (16.6) 9.58 (24.08) Initial yield (%) 4.84% 4.37% 5.06% 5.99% 5.26% Equivalent yield (%) 5.69% 5.32% 5.78% n/a 6.26% Geared returns (%) (13.20%) (34.00%) (3.00%) 16.20% (32.99%) Property level return (%) (3.30%) (16.78%) 2.10% 7.50% (9.84%) Reversionary (%) 15.66% 11.67% 4.42% n/a 14.44% LTV (incl current assets) (%) 51.67% 50.40% 49.10% 69.61% 67.18% Lease Data Average lease length to Break 9.87 11.96 16.60 8.66 8.05 Average lease length to Expiry 10.23 12.58 17.60 8.66 9.70 Passing rent of leases expiring in: 2008 19.37 0.48 1.51 0.52 1.20 2009 5.50 0.41 0.43 2.30 0.63 2010-2012 31.02 1.82 1.86 3.99 1.05 ERV of leases expiring in: 2008 21.49 0.49 1.61 n/a 1.27 2009 6.24 0.40 0.56 n/a 0.84 2010-2012 31.62 2.24 1.91 n/a 1.19 Passing rent subject to review in: 2008 31.28 13.57 14.60 n/a 1.82 2009 15.56 12.98 2.70 n/a 1.36 2010-2012 45.39 26.95 13.77 n/a 4.33 ERV of passing rent subject to review in: 2008 33.22 15.24 16.95 n/a 2.10 2009 18.49 14.91 2.93 n/a 1.60 2010-2012 49.54 29.64 17.57 n/a 4.80 Fund portfolio information (100% figures) - UnauditedAs at December 2007 The Mall The Junction X-Leisure German FIX UK PortfolioRental Data Passing rent (£m) 174.5 56.56 50.67 30.75 9.24 Estimated rental value (£m per annum) 201.8 66.93 58.18 n/a 11.02 Rental Increase (ERV) % 5.50% (1.75%) 2.02% n/a 3.26% Vacancy rate (%) 5.86% 5.18% 3.26% 1.29% 8.46% Like for like net rental income (100%) Current year net rental income £m £m £m £m £m Properties owned throughout 2006/2007 110.7 31.5 36.5 10.0 3.7 Acquisitions 22.7 - 7.0 14.9 3.9 Disposals - 2.5 0.2 - - Development property ------- -------- -------- -------- ------- Total net rental income 133.4 34.0 43.7 24.9 7.6 ------- -------- -------- -------- ------- Prior year net rental income Properties owned throughout 2006/2007 107.7 29.9 39.1 9.8 3.6 Acquisitions 16.8 - - 1.7 0.6 Disposals 0.9 8.6 0.3 - 0.1 Development property ------- -------- -------- -------- ------- Total net rental income 125.4 38.5 39.4 11.5 4.3 ------- -------- -------- -------- ------- Other Data Unit Price (£1.00 at inception) £2.0642 £1.8704 £1.6775 n/a n/a C & R Share 24.2% 27.3% 19.4% 91.4% 100.0% Glossary of terms Capital allowances deferred tax provision. In accordance with IAS 12, fullprovision has been made for the deferred tax arising on the benefit of capitalallowances claimed to date. However, in the Group's experience the liabilitiesin respect of capital allowances provided are unlikely to crystallise inpractice and are therefore excluded when arriving at EPRA NAV. CRPM Capital & Regional Property Management Limited is a subsidiary of Capital &Regional plc and earns the management and performance fees arising from Capital& Regional's interests in the associated Funds and joint ventures. Contribution comprises Capital & Regional's share of the net rents less netinterest arising from Capital & Regional's interests in its joint ventures,associates and wholly owned entities, including foreign exchang forwardpoints movements. CULS is the Convertible Subordinated Unsecured Loan Stock. EPRA adjusted fully diluted NAV per share includes the effect of those sharespotentially issuable under the CULS or employee share options and excluding ownshares held. The unrealised gains and capital allowances deferred tax provision,the fair value of borrowings net of tax and the fair value of trading propertiesare added back. EPRA earnings per share (EPS) is the profit after taxation excluding gains onasset disposals and revaluations and their related taxation, movements in thefair value of financial instruments, intangible asset movements and the capitalallowance effects of IAS 12 where applicable, less taxation arising on theseitems, divided by the weighted average number of shares in issue during the yearexcluding own shares held. EPRA triple net, fully diluted NAV per share includes the effect of those sharespotentially issuable under the CULS or employee share options and excluding ownshares held. NAV is adjusted for the fair value of debt and the fair value oftrading properties. Estimated rental value (ERV) is the Group's external valuers' opinion as to theopen market rent which, on the date of valuation, could reasonably be expectedto be obtained on a new letting or rent review of a property. Equivalent yield is a weighted average of the initial yield and reversionaryyield and represents the return a property will produce based upon the timing ofthe income received. In accordance with usual practice, the equivalent yields(as determined by the Group's external valuers) assume rent received annually inarrears and on gross values including prospective purchasers' cost. ERV growth is the total growth in ERV on properties owned throughout the yearincluding growth due to development. Gearing is the Group's net debt as a percentage of net assets. Seeing throughgearing includes our share of non-recourse net debt in the associates and jointventures. IPD is Investment Property Databank Ltd, a company that produces an independentbenchmark of property returns. Loan to value (LTV) is the ratio of net debt excluding fair value adjustmentsfor debt and derivatives, to the aggregate value of properties (including thesurplus of the open market value over the book value of trading properties),investments in joint ventures and funds and other investments. Like for like (LFL) figures exclude the impact of property purchases and sales on year to year comparatives. Market value is an opinion of the best price at which the sale of an interest inthe property would complete unconditionally for cash consideration on the dateof valuation (as determined by the Group's external valuers). In accordance withusual practice, the Group's external valuers report valuations net, after thededuction of the prospective purchaser's costs, including stamp duty, agent andlegal fees. Net rent is Capital & Regional's share, on a see through basis, of the rentalincome, less property and management costs excluding performance fees, of theGroup, its associates and joint ventures. Net interest is Capital & Regional's share, on a see through basis, of theinterest payable less interest receivable of the Group, its associates and jointventures. Passing rent is the gross rent, less any ground rent payable under head leases. Property under management (PUM) valuation of properties for whom CRPM is theasset manager. Return on equity is the total return, including revaluation gains and losses,divided by opening equity plus time weighted additions to share capital,excluding share options exercised, less reductions in share capital. Recurring pre-tax profit is the sum of Contribution plus management fees,SNO!zone income less SNO!zone expenses, less fixed management expenses. Recurring pre-tax profit per share is the recurring pre-tax profit divided bythe weighted average number of shares less own shares held. Reversion is the estimated increase in rent at review where the gross rent isbelow the estimated rental value. Reversionary percentage is the percentage by which the ERV exceeds the passingrent. Reversionary yield is the anticipated yield, which the initial yield will riseto once the rent reaches the estimated rental value. See through balance sheet is the pro forma proportionately consolidated balancesheet of the Group, its associates and joint ventures. See through income statement is the pro forma proportionately consolidatedincome statement of the Group, its associates and joint ventures. Total return is the Group's total recognised income for the year as set out inthe Consolidated Statement of Recognised Income and Expense ("SORIE") expressedas a percentage of opening equity shareholders' funds, excluding CULS reserve. Total shareholder return is the growth in price per share plus dividends pershare. Triple net, fully diluted NAV per share includes the dilutive effect of shareoptions and CULS and adjusts all items to market value, including tradingproperties and fixed rate debt. SIC 15 "Operating lease - incentives" debtors under accounting rules the balancesheet value of lease incentives given to tenants is deducted from propertyvaluation and shown as a debtor. The incentive is amortised through the incomestatement. Vacancy rate is the estimated rental value of vacant properties expressed as apercentage of the total estimated rental value of the portfolio, excludingdevelopment properties. Variable overhead includes discretionary bonuses and the cost of awards toemployees made under the LTIP and CAP and is spread over the performance period. This information is provided by RNS The company news service from the London Stock Exchange